Auction Rate Securities Fraud Lawyer

Citigroup: Another ARS Offender?

The New York Attorney General’s office announced recently that it will sue Citigroup, the financial-service giant, for fraudulently selling auction-rate securities (ARS) as safe investments. The AG’s office also believes that the company destroyed subpoenaed phone recordings crucial to the five-month investigation conducted by his office.

Citigroup has received subpoenas from the Securities Exchange Commission (SEC) and other regulatory agencies that are investigating the sudden collapse of the relatively obscure ARS marketplace. In February, the market froze, leaving many investors unable to liquidate their positions in the market. Some experts have attributed this collapse to the recent credit crunch.

According to the NY Attorney General, Citigroup represented auction rate securities as a safe, liquid and cash-equivalent investment. He concluded that the presentation of this financial package was false and had detrimental effect to numerous Citigroup customers.

A Citigroup spokesperson claimed that the bank was actively cooperating with the investigation. In their defense, she stated that the company regularly recycles the recordings of phone conversations and that the recycling of subpoenaed tapes was “inadvertent.” The bank reportedly stopped recycling the tapes once they found that the requested tapes had been overlooked.

Apparently, the attorney general’s office was willing to settle. The potential deal would require that Citigroup buy back the auction-rate securities that it purchased and pay a $100 million fine to regulators for their misleading actions.

Citigroup stopped selling ARS in February when the market crashed. The bank had dealt $72 billion in auction-rate securities before the market failed. Citigroup was not the only bank involved. Numerous other banks need to be held accountable for their actions.

If you have an auction-rate securities case, call an ARS attorney at 800.220.9341.